LONDON, 17 March 2021 – Aon plc (NYSE: AON), a leading global professional services firm providing a broad range of risk, retirement and health solutions, has commented on the new consultation on the Single Modular Code from the Pensions Regulator (TPR).
Susan Hoare, partner at Aon, said:
“The new code signals some significant changes in approach, which in turn will mean significant changes in pension scheme practice - although more for defined benefit (DB) than defined contribution (DC) schemes.
“Having a code of practice all in one place is very helpful from a user’s perspective. Ten of the existing codes of practice have been amalgamated into this single modular code (Supercode) which is presented as 51 concise modules. This has allowed TPR to remove a lot of duplication; for example, if you currently search for ‘Conflict of Interest’ on TPR's website, there are a number of different places where it sets out what it means by this.”
Susan Hoare continued:
'However, some of the benefit of the concise modules is lost in combining the codes of practice for both private sector and public service pension schemes. Intermingled in any one module are the differing requirements for both, with the terminology switching between trustees, scheme managers or governing bodies.
“Overall, we see the code as more directive in style, with TPR spelling out clear expectations at the end of each module. While this is a tidying-up exercise, we would recommend that pension schemes check compliance with each of the expectations.
“There are some significant new requirements that have been brought in by the Single Modular Code, including the Own Risk Assessment. We believe it is very much a positive that the requirements on risk management are now more robust. The best governed schemes may well find they already comply and just need to document it in a new way, but for others this may be a significant step up in what is required.”
Interactive approach
Mary Lambe, public sector senior consultant at Aon, said:
“The new code brings not only consolidation but also an interactive online approach with a better search facility and modules that are interlinked. We believe those are welcome developments from TPR. For public sector schemes, the move from one dedicated code - in the main - to a single code for all schemes is likely to require fresh thinking. Interpreting the parts of the code applicable to the public sector alongside implementing any new requirements from TPR is likely to take time.
“LGPS funds should take this as an opportunity to revisit governance more generally, bearing in mind other new developments, not least the Scheme Advisory Board Good Governance Review and forthcoming CIPFA Knowledge and Skills developments.”
Defined contribution schemes
John Foster, partner at Aon, said:
“It seems likely that the implications of the new code will be greater for DB schemes than for DC, but it is significant that DC currently has a standalone code that was the product of a lot of good work by both TPR and the industry. The requirements for DC are now dispersed throughout the new single code.
“At a time when the governance demands on trustees of DC schemes are increasing, it will be interesting to see if this proves to be counter-productive to the aim of simplifying the process for DC trustees - and whether this becomes another reason for schemes to consider alternative structures for their DC arrangements.”
Notes to editors
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